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Introduction
ERP is most often defined as business software which automates the main business
processes of an organization, such as manufacturing, logistics, finances, marketing,
human resources, etc. For a long time being related to the biggest companies of private
and public sectors, now ERP software is suitable for midsize or even small companies.
* Corresponding author.
Vilnius University, Sauletekio Ave. 9, 2309, LT-10222 Vilnius, Lithuania;
E-mail: donatas.ratkevicius@ef.vu.lt
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group consists of criteria related to the implementation partner, and the last one is
associated with implementation consultants criteria (reputation, experience, etc.).
According to Aya and zdemi (2007), ERP selection criteria may be classified in
three dimensions. First, three determinants are defined with regard to their influence
on the companys performance indicators: competitive advantage, productivity,
profitability. After that, 7 dimensions and 22 criteria are described. All criteria of
one dimension are connected and influence each other either positively or negatively.
Competitive advantage is related directly to system costs (licence fee, consultant expenses,
maintenance cost, infrastructure cost). Productivity directly correlates with the system
support efficiency. Profitability influences more than half (13 out of 22) of the criteria
research paper (upgrade possibility, ease of integration, ease of in-house development,
functionality, module completion, function fitness, security level, reliability, stability,
possibility of recovery, ease of use, ease of operations, ease of learning, technology
advance, standardization, integration of legacy systems, easy to maintain).
Bueno and Salmeron (2008) have modeled a practical ERP selection tool and defined
the largest set twenty seven of ERP selection criteria. Of them 17 are related to ERP
software and the other 10 to the organization where implementation is performed.
The further identification of relations among the criteria divided them into another six
subgroups. Four of them involve criteria related to ERP software, whereas the last two
are related to the organization. ERP selection criteria subgroups related to ERP software
features may be sorted in the order of diminishing importance: ERP system reliability and
the spectrum of offered services; implementation efficiency; project costs; ERP vendor
prestige. In the organizational factors group, the subgroup of organization flexibility
strongly outweighs another one ERP similarity to current IS/IT.
Verville and Halingten (2003), also Wei, Chien and Wang (2005) have highlighted the
importance of choosing a suitable ERP vendor. Wei draws a clear boundary between
ERP selection factors related to the ERP system itself and factors related to the ERP
vendor. In the ERP software selection process, he suggests to take into account six
groups of criteria related to increase in the ERP project efficiency, which are minimized
total cost, minimized implementation time, complete functionality, user-friendly
interface and operations, excellent system flexibility, high system reliability; also, the
vendor reputation, technical capabilities and provision of ongoing services need to be
considered in ERP vendor selection process.
From the arguments presented above, it is evident that the diversity of ERP selection
factors complicates their classification into standard groups. Most often, system selection
criteria are defined regarding the researchers area of interests and are divided into two,
three or four groups. Taking into consideration the nature of criteria in this research,
we have split the ERP selection criteria into two groups: the first group consists of
ERP software-related criteria and the comprises other one of ERP implementationrelated criteria.
99
40
2007
20
0
Funcionality
Costs
Ease of use
FIG. 1. The most popular ERP selection criteria (Aberdeen Group, 2006, 2007)
The surveys performed in the years 2008 and 2009 have evaluated the importance
of ERP selection factors on a 5-point scale (5 being the most significant and 1 the least
significant). The accumulated results (Fig. 2) have shown the same three most important
ERP selection factors as in 2006 and 2007 surveys. Functionality has remained the
importance leader with 4.8 points out of 5.
100
5.0
4.5
2008
4.0
2009
3.5
Funcionality
Ease of use
Costs
FIG. 2. The importance of ERP selection criteria (Aberdeen Group, 2008, 2009)
According to Aya and zdemir (2007), ERP functionality directly affects the
companys productivity level and can be assessed considering the complexity of the
modules, the suitability of the functions, and the security level of the system. Han (2004)
has analyzed ERP functionality as a unique and the main significant ERP selection
criterion, separating three levels of system functionality. The first one includes the basic
system functionality, the second one the desirable functionality which could help
optimize business processes and lead to an increase in work efficiency, and the third
level provides an additional ERP functionality which extends the limits of collected
and processed information (for example, ensuring real time communication between
customers and suppliers). Such a classification of ERP functionality helps to reduce
the number of suitable ERP systems. Keil and Tiwana (2006) are of a similar opinion,
defining functionality as a criterion which assesses ERP functional correspondence to the
companys requirements. Wei, Chien and Wand (2005) define ERP functionality as a fit
between organization and system, including system security and modular complexity.
ERP functionality could be used as a reference point to prioritize the performed
functions as one of the principal ERP selection strategies. In accordance with it, attention
should be focused on the functional areas that are closest to generating profit, e.g., the
supply chain, inventory, or client relationships management. This functionality must
work properly and efficiently with an option to extend the systems functional capacity.
Total costs of ERP implementation project. This is the ERP selection criterion
which is also mentioned quite often. It has been pointed out by Aya and zdemir (2007),
Bueno and Salmeron (2008), Fisher, Fisher and Kiang (2004), Keil and Tiwana (2006),
Lall and Teyarachakul (2006), Rao (2000), Umble, Haft and Umble (2003), Wei, Chien
and Wang (2005), Yang, Wu and Tsai (2007), Mabert, Soni and Venkatraman (2000),
Bernroide, Koch (2001) and others. Most of researchers include un upgraded technical
infrastructure, software licenses, ERP implementation and support, and user training into
ERP implementation costs. According to Aya and zdemir, system cost or price is a
dimension which determines a companys competitive advantage and is calculated as the
total amount of expenses related to ERP implementation.
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Summarizing different definitions, ERP costs include all ERP implementation and
usage costs (both direct and indirect) during the total lifetime of the system. Direct
expenses involve hardware, software and implementation costs. Indirect, or hidden,
expenses are related to productivity drop during the ERP implementation period when
activity outage or stoppage occur. To assign this kind of expenses to the project is much
more complicated than to assign direct costs, but in the majority of cases this amount is
significant and needs to be given at least an approximate estimate.
ERP practitioners give much attention to an inadequate analysis of ERP implementation
cost areas. Most extensively these costs have been analyzed by Leon (2007) who identified
eight such areas. These areas could be divided into two groups. The first group includes
insufficiently identified costs related to an incorrect calculation of the direct amount of
project work: customization, interaction and testing, data conversion, data analysis. The
second group is related to interruption possibilities and work efficiency fluctuations of
internal staff members during the ERP implementation project: trainings, brain drain
(employee turnover), and ongoing maintenance.
Vendor reputation. This criterion has been cited in the research papers of Kumar,
Kumar and Maheshwari (2002, 2003), Lall and Teyarachakul (2006), Liao, Li and Lu
(2007), Siriginidi (2000), Chen (2001), Bernroide and Koch (2001), Everdingen (2000)
and others. After an ERP acquisition, the need of a long-lasting partnership between
the organization and the ERP vendor emerges. Therefore, a company with a new ERP
system hopes to have a solid and credible ERP vendor and its ecosystem.
This selection factor is of rather social than technical nature and could be evaluated
considering the image of the ERP vendor, its financial stability, situation in the market
(market share, respectability) as well as a combination of practical achievements
(Verveille and Hallingten, 2002) which could be assessed by the number of successful
ERP sales, specific industry knowledge, income changes, the technological maturity of
offered production or its development. Wei, Chien and Wang (2005) consider that ERP
vendor reputation mainly depends on its market share and general financial situation.
Meanwhile, Keil and Tiwana (2006) treat this factor as an additional but unconditional
ERP vendor production feature, which doesnt have a technical equivalent.
According to the authors, the most sophisticated definition of ERP vendor reputation
has been introduced by Verveille and Hallinten (2003), which covers not only the abovementioned financial stability and market share factors, but also some other criteria, such as an
increase of annual turnover, a range of proposed production, its recognition, technological
and strategically vision, longevity and experience performing implementation projects to
the same size and industry companies, recommendations, possibilities to assure a high
service quality independently of client needs and possible changes.
Researchers treat the importance of ERP vendor reputation differently. This factor
is defined as one of the four (Chau, 1995) or six (Brown and Stephenson, 1981) most
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enough, or the potential ERP system buyer would get a logically reasonable answer
about system potential to match companys needs today and in the near future.
Upgrade ability. This indicator characterizes the option provided by the ERP vendor
to upgrade the current ERP to a newer version. The criterion is described by Kumar,
Maheshwari and Kumar (2002, 2003), Rao (2000), Sprott (2000), Bueno and Salmeron
(2008). When considering the possible upgrades of the current ERP system, several
issues are important: how easy is the transition to the newest version and what kind
of modifications the systems vendors are planning to launch during the next 35 years
(Hecht, 1997). The definition of upgrade is very often confused with systems update
which includes only correction of mistakes in the actual ERP version. In case of system
upgrade, a completely new version of business software with new functional possibilities
is rolled out.
The cost of ERP upgrades is high (Montgomery, 2004). System upgrade is one of the
main jobs of post-implementation and a system support phase (Nah, Faja, Cata, 2001). It
helps to extend the duration of the system use as a long-term investment. Since the business
environment is constantly changing, some necessary upgrades need to be done during the
whole ERP life cycle to ensure the same ERP value for their company. The ERP market
leaders constantly upgrade their production quality characteristics with new versions.
According to an AMR consultancy study (Swanton 2004), 55% of upgrades have
been voluntary business improvements triggered by the need for a new functionality,
expansion or consolidation of systems, 24% of upgrades were initiated by technology
changes, 15% of upgrades were induced by the discontinued support of the current
version of the software to avoid vendor support termination, and 6% of upgrades were
caused by bug fixes or statutory changes.
ERP upgrade should be evaluated as a normal ERP implementation of a smaller
scope. Therefore, in order to successfully manage the whole upgrade process,
appropriate implementation and planning methodologies should be used to define work
size, executed tasks and delegated resources, changes in the organizational structure.
The ERP upgrade process incurs costs which are approximately at 2533% of the initial
investment (Carlino et al., 2000). Swanton (2004) has also mentioned that the cost of
each upgrade includes 50% of the original software license fee and 20% of the original
implementation cost per user.
Customization/parameterization possibilities could be defined as a feature that
helps to adjust ERP software to specific organization needs (Keil and Tiwana, 2006).
The factor was also mentioned by Berchet and Habchi (2005), Kumar, V., Kumar, U.
and Maheshwari (2003), Verville and Halingten (2003), Yang, Wu and Tsai (2007) and
others.
Literature review of Mabert et al. (2000) has shown that companies rank this factor
as important or as very important. Currently, ERP is becoming a business process
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improvement tool (Shikarpur, 1997). Therefore, ERP vendors propose solutions that are
parameterized in advance using and classifying the most popular business processes by
companies size or industry. According to Bueno and Salmeron (2008), partly customized
solutions significantly decrease the ERP implementation period and system support costs.
At the initial phase of ERP implementation, ERP consultants, together with internal
company staff, would have to prepare three different lists of functions: the first with the
critical, the second with important, and the third with a desirable functionality. If ERP is
selected properly, all provided standard functionality have to ensure the fulfillment of at
least critical functions. A partial parameterization could be done only within the limits
of important or desirable functionality. This type of work is strongly related to end-user
satisfaction and to the whole success of ERP implementation because of its support in
creating a more attractive IT work environment.
Ease of use. This is an important but very often undervalued ERP selection criterion
mentioned by Bueno and Salmeron (2008), Pivnicny and Carmody (1989), Verville and
Halingten (2003), Yang, Wu and Tsai (2007), Everdingen (2000). Wei, Chien and Wang
(2005) defines it as a measure for the simplicity of training and use. Keil and Tiwana
(2006) treat this criterion as a possibility to use software intuitively, without additional
specific knowledge. According to Montazemi (1996), ERP has to be simple and easy
to understand for the average IT user, because work efficiency with ERP influences the
results of the whole organization. Aya and zdemir (2007) also affirm that this factor
determines the productivity of organization. Chau (1995) treats the feature of the ease of
use as one of the four most important ERP selection criteria of technical nature.
One of the most serious ERP selection mistakes is related to this factor: very often
ERP buyers focus on ERP price and its functionality without considering the IT skills
of future users. On the one hand, it is recommendable to consider the crucial system
functionality aspects and its extension possibilities. On the other hand, the evaluations
of user interface with potential ERP users from different companys departments also
need a more thorough look. Summarizing the findings of their research, Anderson and
Chen (1997) highlight the fact that the importance of the ease of use as one of ERP
selection factors increases with the development of ERP functional power. Matthews,
while analyzing systems usability features, emphasizes that a modern information
system needs a SOA-based architecture, application service for internal information
search, as well as intuitive and understandable web-like navigation for an easy analysis
of the sequence and logic of workflows (Matthews, 2008).
Until now, there have been a lot of discussions about the most comfortable user
interface logic or menu functions layout. Therefore, the biggest ERP vendors have
developed solutions with the possibilities to personalize system screen colours, text sizes,
menu structure or report generation display settings. After the top management decision
to modernize the companys processes related to information gathering and processing,
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the opinion of end users needs to be taken into account. Potential resistance to changes
and dissatisfaction of the companys employees about top management decisions could
cause the overall failure of the ERP implementation project.
Flexibility. This criterion is widely discussed by ERP theoreticians. According to
Aya ir zdemir (2007) and Wei, Chien and Wang (2005), ERP flexibility directly affects
a companys profit and could be evaluated by estimating upgrade abilities, simplicity of
integration and internal programming work. ERP flexibility as an important factor is
recognized by Umble, Haft and Umble (2003), Sprott (2000), Bernroide and Koch (2001),
Everdingen (2000). The most sophisticated definition of flexibility is offered by Nelson
and Ghods (1998) the ability to adapt to both incremental and revolutionary changes in
the business or business process with minimal time, effort, cost, or performance losses.
ERP is a long-term investment to the business efficiency, so it also needs to be adaptable
to the needs of company which changes its organisational structure or size, turnover or
work volumes. From another point of view, a too flexible ERP system could reasonably
decrease the efficiency of processed information and could provoke an increased use of
a nonstandard business process which is difficult to handle. However, ERP vendors are
trying to find an optimal system flexibility solution that helps to implement necessary
modifications, simultaneously retaining the standard ERP structure.
The evaluation of ERP flexibility by company size has shown that small or middle
sized companies tend to give more importance to this factor than the largest ones
(Bernroider and Koch, 2001).
Modularity. The factor of ERP modularity is analyzed by Bueno and Salmeron
(2008), Kumar, Maheshwari and Kumar (2002, 2003) and others. This feature enables
ERP customers from all available functionality to choose modules and functional
groups that are necessary for their organization. It helps to decrease significantly ERP
implementation time and project costs, paying only for the system features that will be
actually used. Before taking a decision which standard and additional modules will be
used, an analysis of internal and external business processes should be done (Ziaee,
Fathian and Sadjadi, 2006) as well as research of the nature of processed information,
user interface, system upgrade abilities and the cost of the project.
As stated above, the usage of standard ERP modules could significantly decrease
the system implementation costs. Therefore, in this case, some necessary changes in
the areas of work procedures and methods, distribution of tasks, necessary competences
or education should be done. On the other hand, the significant functional divergence
from the standard functionality could result in a increase of the overall project risk,
considering a longer implementation time or a possibly bigger scope of system support,
update or upgrade.
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A theoretical and empirical research on 500 Taiwan companies (Chen, Tsai, Chen,
2009) has shown that ERP implementation success directly correlates with ERP and
organizational fit. This conclusion was confirmed by Weill and Olson (1989) in the
analysis of scientific essays. In 70% of cases, the statement was accepted that with a
good technological, structural and strategically compatibility the results of company
activities would be positive.
According to Henderson and Venkatraman (1993), IT investment failures are frequently
related to incompatibility between IT and the business strategy. Gattiker and Goodhue
(2000) emphasize the fact that the ERP system is a software used for integration business
processes in the entire enterprise. When there is a strong relationship between different
functional departments of an enterprise, the ERP system will better fit the requirements
of the enterprises general processes. On the other hand, the discrepancy between the
processes of each functional department will decrease the compatibility of ERP software
and the operational requirements of the enterprise. The research model developed by
Hong and Kim (2002) for investigating relations between the organizational fit of the
ERP system and the success of ERP implementations disclosed an apparent positive
outcome of this kind of dependence for the whole implementation. Generally, according
to Kumar (2003), organizational fit as an important ERP selection criterion has been
mentioned in 64% of cases.
In practice, this factor is related to the analysis of similarities and differences between
business processes of the company and the ERP system. Most often, attention in an ERP
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important is described only in the paper by Bueno and Salmeron (2008), other researchers
also mention end-user readiness by associating it to other selection factors such as user
training or system support, etc.
The majority of project managers tend to relate ERP implementation failures to
technical problems, although actually about 50%. (Albadri, Abdallah, 2009) of these
failures depend on system end-users: resistance to changes, not enough training efficiency
or a low overall companys culture. The management of organizational culture is one
of the main issues, which includes employees personal values, habits, skills, business
processes and the general attitude toward the staff.
According to War (2005), the management of organizational issues is even more
difficult than solving technical problems. Researches made by Summer (2000), Wright
(2002) also confirm this statement. Most of ERP implementation failures were caused
by an inadequate planning and end-user involvement or the lack of professional skills.
Many functionally powerful and efficient ERP systems could be less attractive than a
simpler solution in cases when employees lack sophisticated IT knowledge.
System support quality. This criterion is often named as the most important ERP
selection factor related to the post-implementation process. It includes assessment of the
quality of warranty services and is mentioned by Fisher, Fisher and Kiang (2004), Kumar,
Maheshwari and Kumar (2002, 2003), Liao, Li and Lu (2007), Rao (2000), Umble, Haft
and Umble (2003), Verville and Halingten (2003), Siriginidi (2000), Bernroide and
Koch (2001), Everdingen (2000) and others. In spite of the general recognition of the
importance of the ERP system support quality, there is no generic description of this
criterion. According to Aya and zdemir (2007), the system support is the dimension
that determines ERP productivity and could be described by using five related variables
such as a good vendors reputation, consulting performance, R&D capability, a technical
support capability, training performance. Meanwhile Wei, Chien and Wang (2005)
interpret it as a set of warranted consulting services (e.g., adequate number of experienced
consultants), training service (e.g., package of training lessons) and service speed (e.g.,
well developed problem-solving procedures).
The system support quality could be estimated quantitatively by the number of
vendor-certified consultants or the number of granted support cases for system incidents,
online help work efficiency, by average reaction time to the incidents, etc.
ERP go-live support is ensured by all three elements of its ecosystem: by the ERP
vendor, by the network of ERP implementation partners, and by ERP user companies.
External system support providers maintain the actual ERP version (e.g., error corrections,
modifications) as well as perform upgrades to the new ERP system releases and versions
and ensure a permanent consulting service to their clients.
To ensure all kinds of the above-mentioned services, ERP vendors need to have
enough financial resources for research activities or the creation and application of
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new technologies. ERP implementation partners also need to constantly develop the
consulting knowledge base, improve ERP implementation methodologies and apply
them in practice, improving project quality.
It is crucially important that both ERP implementation and system support would
be performed by an experienced team that needs to be evaluated during ERP selection.
Hereby, an efficient ERP performance could be assured during the whole ERP exploitation
period. Therefore, it is strongly advisable to avoid dependence on one ERP vendor or
implementation partner and thus to reduce the risk of ERP investment. This kind of risk
could be minimized by the alternative consulting providers as well as developing inhouse knowledge.
CONCLUSIONS
The analysis of research papers has shown that there is no unique classification of ERP
selection criteria. This could be explained by their diversity as well as by differences
of scientists research objects. Mostly, the criteria are only defined and in some cases
classified on the basis of the research object. According of the nature of criteria, the
authors of this paper separate them into two groups: software-related and implementationrelated ERP selection criteria.
According to the majority of research papers and practical investigations, ERP
functionality is recognized as the most important and significant ERP selection
criterion which is closely related to the whole outcome of the ERP selection process.
The significance of other factors may vary depending on the situation in the company
future ERP users skills, the implementation projects scope, the complexity of business
processes, etc. To ensure ERP implementation success, it is necessary to have knowledge
of very different areas: ERP software functionality, project and change management,
business process, training organization, etc. All these areas are closely associated with
implementation-related ERP selection factors: organisational fit, end-users readiness,
training and system support quality and the overall ERP implementation ease and speed
predefined by the complexity of the business environment and the level of business
transformation conditioned by technological changes. The principal conclusion of this
paper is as follows: although the two groups of implementation criteria are interdependent,
the software-related criteria are easier to control because of their technical nature,
while the implementation-related criteria, being of dominant importance for ERP
implementation success, depend more on the human factors and therefore need more
effort and attention.
The efficiency of ERP users training depends not only on their readiness and overall
level of IT knowledge, but also on the ability of ERP consultants to combine different
methods of training. Combining creative methods and holistic approach, as well as
clarifying the advantage of the new system not only to the companys top management
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but also to the end users, ERP training could be treated as a tool for delivering a deeper
business environment knowledge.
The use of a standard ERP implementation methodology could dramatically decrease
ERP implementation costs in all project phases, shorten the overall implementation of
duration project and raise the work efficiency.
To ensure the efficiency and impartiality of the ERP selection process, it is necessary
to examine the possibility of a quantitative evaluation of the above-mentioned ERP
selection criteria.
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